RBS agrees £3.6bn settlement with the US authorities over mortgage scandal

Royal Bank of Scotland has today announced that it has reached a civil settlement in principle with the US Department of Justice (DoJ) to resolve its investigation into RBS’s issuance and underwriting of toxic US residential mortgage-backed securities prior to the financial crisis between 2005 and 2007.

The government is now expected to start selling its 71 per cent stake in the bank.

Under the terms of the proposed settlement, RBS has agreed to pay a civil monetary cash penalty of US $4.9 billion (c. £3.6bn).

Of this amount, $3.46 billion will be covered by existing provisions with an incremental charge of US$ 1.44 billion in Q2 2018.

RBS chief executive Ross McEwan, said: “Today’s announcement is a milestone moment for the bank. Reaching this settlement in principle with the US Department of Justice will, when finalised, allow us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis. Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer.”

Donald Brown, head of private clients at Brewin Dolphin in Edinburgh, said: “The cost of RBS’s settlement with US regulators is better than analysts had been expecting and removes a major hurdle to the Chancellor’s long-stated aim of off-loading part of the taxpayer’s stake in the bank. It also allows the bank to focus once more on restoring dividend distributions to long-suffering shareholders - but that remains an aspiration in the near term. Whilst this latest development is broadly positive, and the shares have responded well today, we remain cautious short term in the knowledge that the Government remains a seller.”